China's Top Five Power Producers Run into Deficit in 1Q08

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Researched by Industrial Info Resources (Sugar Land, Texas)--Because of rising fuel prices and new regulations on the price of electricity, China's top five power producers experienced a deficit in the first quarter of 2008, according to information disclosed at an internal symposium organized by the State Electricity Regulatory Commission (SERC). Officers from major power producers and grid operators attended.

At the symposium, the top five power producers appealed in one voice to the SERC, requesting that the state government implement the price-link mechanism between coal and power. China Huaneng Group (Beijing), the only one of the top five which maintained a weak profit in the first two months, also experienced a loss in the first quarter. More than 60% of units with single capacity over 300 megawatts (MW) had run into a loss, said Liu Bo, Vice Director of the Operation Department of China Huaneng Group.

The output of China Power Investment Corporation (Beijing) reached 64.3 billion kilowatt-hours (kWh) in the first four months this year, an increase of 10.5%. However, its fuel cost increased over $200 million.

"China Datang Corporation (Beijing) experienced an overall deficit the first time in the past five years. There are 10 coal-fired plants with a coal stockpile of less than the consumption of three days, accounting for 17.5% of the total, and the fuel cost has increased over $328 million," said Fang Xiao, Director of the Operation Department of China Datang Corporation.

The output of China Huadian Corporation (Beijing) reached 70.1 billion kWh in the first quarter this year, an increase of 24.55% year over year. However, the loss reached $47 million, said Wang Xinan, Director of the Marketing Department of China Huadian Corporation.

"The more power generated, the more in loss," introduced Zhang Wenjian, Vice Director of the Marketing Department of China Guodian Corporation (Beijing). The output of China Guodian Corporation reached 74.2 billion kWh in the first quarter this year, an increase of 27.9% year over year.

A more serious situation is that all of them have received notices from coal producers again about the rising price of coal. Because of the loss in operation, many power plants are facing a difficulty in cash flow. It has also become increasingly difficult to obtain loans from banks under the current situation.

Although China's power producers have requested for the government to implement a price link mechanism between coal and power, the government has refused to do so because of the high inflation rate.

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